Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Portfolio investment entities - Introductory provisions

HM 5: What is an investor class?

You could also call this:

“An investor class is a group of investors with equal rights and similar investment shares in an entity”

An investor class is a group of one or more investors in an entity. For a group to be an investor class, all the investors must have the right to get money from the entity’s investments in the same way.

All the investors in the group must have the same investments. Each investor’s share in the investment should be close to the average for the group. It can’t be more than 2.5% different from the average, unless:

  1. The investment guarantees that the entity will get enough money to pay back what each investor put in, and
  2. Any difference larger than 2.5% is because of different tax rates for the investors.

When thinking about investor classes, you don’t need to worry about extra dividends paid to overseas investors. These extra dividends don’t count, even if they would normally be given to the investor according to section HM 44B(2).

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2888712.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

HM 4: Who is an investor?, or

“This explains who counts as an investor in a Portfolio Investment Entity (PIE) or similar fund”

Next

HM 6: Intended effects for multi-rate PIEs and investors, or

“How tax works for multi-rate PIEs and their investors”

Part H Taxation of certain entities
Portfolio investment entities: Introductory provisions

HM 5What is an investor class?

  1. An investor class of an entity means a group of 1 or more investors in the entity that meet the requirements of subsections (2) to (4).

  2. Each investor in the group must have an entitlement to a distribution by the entity of proceeds from the entity's investments that means the requirements of subsections (3) and (4) are met.

  3. The investments must be the same for all investors in the group.

  4. Each investor’s interest in the investment as a proportion of the value of their entitlement must not differ from the average value for the group and the investment by 2.5% or more unless—

  5. the investment is an arrangement under which the PIE is assured of receiving sufficient proceeds from the investments to repay each investor in the group an amount contributed to it; and
    1. the excess in any difference between the proportion for the investor and the average value for the group arises from differences between the notified investor rates of those investors in the group.

      1. For the purposes of this section, the payment of a supplementary dividend that is attributed to a notified foreign investor, or would be attributed to them in the absence of section HM 44B(2), is disregarded.

      Compare
      • s HL 5B(2), (3)
      Notes
      • Section HM 5: inserted, on (applying for the 2010–11 and later income years), by section 292(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section HM 5(4)(a): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 86(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
      • Section HM 5(4)(b): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 53(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
      • Section HM 5(5) heading: inserted, on (applying for the 2013–14 and later income years), by section 88(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section HM 5(5): inserted, on (applying for the 2013–14 and later income years), by section 88(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section HM 5 list of defined terms investor interest: repealed (with effect on 1 April 2010), on , by section 86(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
      • Section HM 5 list of defined terms notified investor rate: inserted (with effect on 1 April 2010), on , by section 53(2)(a) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
      • Section HM 5 list of defined terms notified tax rate: repealed (with effect on 1 April 2010), on , by section 53(2)(b) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
      • Section HM 5 list of defined terms supplementary dividend: inserted, on (applying for the 2013–14 and later income years), by section 88(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).